The Federal Reserve and Quantitative Easing!

Why read: Because you need to keep updated on what the U.S. Federal
Reserve may or may not introduce by way of further significant quantitative
easing in the near and longer term. This is something many believe both the
equity and physical
gold markets are counting on.

Commentary: On Wednesday the U.S. Federal Reserve offered up its August
summary of its current views. On Wednesday the gold price increased significantly
to over U.S.$1,660, and increased a few more dollars in price yesterday.

Whether you read the article referenced in this commentary or other articles
on the Fed Meeting Minutes then made public, I suggest you focus on what seems
to be to be a dependence by the Federal Reserve members on short-term economic
statistics.

The U.S. Federal Reserve has to be the 'most listened to' Central Bank in
the world. It seems to me its members ought to be more proactive, and less
reactive, to what they believe is the likely direction of the U.S. economy
than they seem to be. Stated differently, I find it difficult to believe the
U.S. Federal Reserve members don't collectively have a strongly held belief
in where things are headed. That said, they don't seem to have a formalized
strategic plan other than expressing willingness to possibly throw more quantitative
easing (exact methodology yet to be announced) at the wall and see what sticks.

To the outside observer, the Federal Reserve seems to be doing little but
taking a 'wait and see, and then we will respond to whatever prove to be the
then existing circumstances' attitude. To the extent this observation is a
fair one, it is a worrisome one.

Following from the foregoing, perhaps the U.S. Federal Reserve simply is keeping
its powder as dry as it can for as long as it can because it isn't able to
predict with any comfortable degree of certainty what is likely to happen economically
in the Eurozone, China and the United States in the next weeks and months.
In fairness, if that is indeed what is going on, the U.S. Federal Reserve's
seeming procrastination makes sense to me - but if this indeed is what is going
on I say 'hang on to your hat'.

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